Question 1

The Marketing Department is most likely considered to be a(n)

Accepted Answer

A)  profit centre. 
B)  revenue centre. 
C)  investment centre. 
D)  cost centre. 
A)  profit centre. 
B)  revenue centre. 
C)  investment centre. 
D)  cost centre.

Question 2

Economic value added (EVA) is

Accepted Answer

A)  before-tax operating income minus the total annual cost of capital. 
B)  after-tax operating income minus the total annual cost of capital. 
C)  after-tax operating income minus the before-tax cost of debt. 
D)  none of the above. 
A)  before-tax operating income minus the total annual cost of capital. 
B)  after-tax operating income minus the total annual cost of capital. 
C)  after-tax operating income minus the before-tax cost of debt. 
D)  none of the above.

Question 3

Return on investment (ROI) is calculated as

Accepted Answer

A)  Divisional operating income/Divisional investment. 
B)  Divisional investment - Division income. 
C)  Divisional investment/Divisional operating income. 
D)  Divisional income - (Divisional investment *Required rate of return). 
A)  Divisional operating income/Divisional investment. 
B)  Divisional investment - Division income. 
C)  Divisional investment/Divisional operating income. 
D)  Divisional income - (Divisional investment *Required rate of return).

Question 4

Figure 19-2
The following results for the year pertain to the Northern Division of Garvey Ltd.:  
-Refer to Figure 19-2. Northern's total capital employed is £1,200,000, and their weighted average cost of capital is 12 per cent. Economic value added for the Northern Division is

Accepted Answer

A)  £240,000. 
B)  £144,000. 
C)  (£104,000). 
D)  £16,000. 
A)  £240,000. 
B)  £144,000. 
C)  (£104,000). 
D)  £16,000.

Question 5

____ exists when the major functions of organization are controlled by top management.

Accepted Answer

A)  Decentralization 
B)  Centralization 
C)  Optimization 
D)  An unfavorable overhead variance 
A)  Decentralization 
B)  Centralization 
C)  Optimization 
D)  An unfavorable overhead variance

Question 6

The following information is provided:   Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 8 per cent. If you were the division manager and you were evaluated based on ROI, which projects would you accept?

Accepted Answer

A)  Projects A, B, and C 
B)  Projects A and C 
C)  Projects A and B 
D)  Project A only 
A)  Projects A, B, and C 
B)  Projects A and C 
C)  Projects A and B 
D)  Project A only

Question 7

O'Neil Company requires a return on capital of 15 per cent. The following information is available for 2011:   Required: 
a.
Compute return on investment using both book and current values for each division. (Round answer to three decimal places.)
b.
Compute residual income for both book and current values for each division.
c.
Does book value or current value provide the better basis for performance evaluation?
d.
Which division do you consider the most successful?

Accepted Answer

The answer of O'Neil Company requires a return on capital...

Question 8

Figure 19-1   Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 6 per cent.
-GreenWorld Company wants to increase its ROI from 20 per cent to 25 per cent in the current year. They cannot increase operating income and sales from the previous year's levels of £50,000 and £1,200,000, respectively. To increase ROI, GreenWorld should

Accepted Answer

A)  make additional investments of £25,000. 
B)  sell obsolete inventory for £10,000 and use the proceeds to pay off debts. 
C)  sell obsolete inventory for £50,000 and use the proceeds to pay off debts. 
D)  GreenWorld can't increase ROI. 
A)  make additional investments of £25,000. 
B)  sell obsolete inventory for £10,000 and use the proceeds to pay off debts. 
C)  sell obsolete inventory for £50,000 and use the proceeds to pay off debts. 
D)  GreenWorld can't increase ROI.

Question 9

Assuming all other things are equal, a company's ROI would decrease when

Accepted Answer

A)  operating expenses increase. 
B)  operating income increases. 
C)  average operating assets decrease. 
D)  operating expenses decrease. 
A)  operating expenses increase. 
B)  operating income increases. 
C)  average operating assets decrease. 
D)  operating expenses decrease.

Question 10

Figure 19-3
The following results for the year pertain to the Maddox Division of Ryan Ltd.:   The weighted average cost of capital is 12 per cent. The firm's minimum required rate of return is 14 per cent. Taxes for the firm are 40 per cent.
-The EVA of Credit Financial's African Division was (£15,000) last year. If after-tax income is £60,000 and the capital employed totaled £500,000, what is the weighted average cost of capital?

Accepted Answer

A)  15% 
B)  3% 
C)  12% 
D)  9% 
A)  15% 
B)  3% 
C)  12% 
D)  9%

Question 11

Figure 19-1   Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 6 per cent.
-If Dixie Company has sales of £1,200,000 and operating assets of £600,000, what operating margin will they have to earn to generate an ROI of 20 per cent?

Accepted Answer

A)  5% 
B)  7.5% 
C)  10% 
D)  20% 
A)  5% 
B)  7.5% 
C)  10% 
D)  20%

The Marketing Department is most likely considered to be a(n)

Economic value added (EVA) is

Return on investment (ROI) is calculated as

Figure 19-2 The following results for the year pertain to the Northern Division of Garvey Ltd.: -Refer to Figure 19-2. Northern's total capital employed is £1,200,000, and their weighted average cost of capital is 12 per cent. Economic value added for the Northern Division is

____ exists when the major functions of organization are controlled by top management.

The following information is provided: Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 8 per cent. If you were the division manager and you were evaluated based on ROI, which projects would you accept?

Assuming all other things are equal, a company's ROI would decrease when

Figure 19-1 Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 6 per cent. -If Dixie Company has sales of £1,200,000 and operating assets of £600,000, what operating margin will they have to earn to generate an ROI of 20 per cent?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

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Exam 19: Divisional Financial Performance Measures

The Marketing Department is most likely considered to be a(n)

Economic value added (EVA) is

Return on investment (ROI) is calculated as

Figure 19-2 The following results for the year pertain to the Northern Division of Garvey Ltd.: -Refer to Figure 19-2. Northern's total capital employed is £1,200,000, and their weighted average cost of capital is 12 per cent. Economic value added for the Northern Division is

____ exists when the major functions of organization are controlled by top management.

The following information is provided: Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 8 per cent. If you were the division manager and you were evaluated based on ROI, which projects would you accept?

Assuming all other things are equal, a company's ROI would decrease when

Figure 19-1 Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 6 per cent. -If Dixie Company has sales of £1,200,000 and operating assets of £600,000, what operating margin will they have to earn to generate an ROI of 20 per cent?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

Filters